Determinants of financial inclusion: does culture matter?

This study aims to assess the role of culture as a determinant of financial inclusion, defined with respect to formal account ownership, saving and credit in/from formal financial institutions. A sample of 85 countries, comprising 50 developing and 35 developed countries from the World Bank’s Global Findex database is used to perform probit estimations. Hofstede’s cultural dimensions, namely power distance, individualism/collectivism, masculinity/femininity, uncertainty avoidance, short/long-term orientation, and indulgence/restraint are used as culture measures. Our findings indicate that living in high power distance, more masculine, and high uncertainty avoidance cultures reduces the likelihood for financial inclusion. Meanwhile, living in more individualistic, long-term oriented, and more indulgent cultures increases the likelihood for financial inclusion. These findings are relevant for the design of policies to foster financial inclusion across the developing world, especially as financial inclusion affects poverty levels and reduction strategies, and economic development as a whole. We provide evidence which dismisses the global “one size fits all” strategy applied to development-related initiatives like the global provision of funds towards financial inclusion, and argue for a more customised approach given country-level differences conditioned by different cultural frameworks.